Anatomy of a Failed Project: The First Panama Canal Project
Risk management is never just about looking forward. Heeding the lessons learned on projects of all types—even some very
distant
examples—can help you avoid problems on new projects. One such example, illustrating that people have been making similar mistakes for a long, long time, is the initial effort by the French to construct a canal across Panama.
For obvious reasons, the building of the Panama Canal was not,
strictly
speaking,
impossible
. However, the initial undertaking was
certainly
premature; the first canal project, begun in the late 1800s, was a massive challenge for the technology of the day. That said, lack of project management
contributed
significantly to the decision to go forward in the first place, the many project problems, and the ultimate failure.
Precise definition for the project was unclear, even
years
after it
began
. Planning was never thorough, and changes in the work were frequent and managed informally. Reporting on the project was sporadic and
generally
inaccurate (or even dishonest). Risks were not identified effectively or were ignored, and the primary risk management strategy seems to have been "hoping for the best."
Although people speculated about a canal in Central America years before actual construction began, the first serious investigation of the possibility of such a project was undertaken in the mid-1800s. Estimates were that such a canal would provide $48 million a year in shipping savings and that it might be built for less than $100 million. Further study on-site was less optimistic, but in 1850 construction of a railroad across the Isthmus of Panama started. The railroad was ultimately completed, but the $1.5 million, two-year project swelled to $8 million before it was finished, three years late, in 1855. After a slow start, the
railroad
did
prove
a financial success, but its construction problems foreshadowed the canal efforts to come.
A few years later, on the other side of the world, the Suez Canal was completed and opened in 1869. This project was sponsored and led successfully from Paris by Ferdinand de Lesseps. This triumph earned him the nickname "The Great Engineer," although he was actually a diplomat by training, not an engineer at all. He had no technical background and only modest skills as an administrator. However, he had completed a project many thought to be impossible and was now world-famous. The Suez project was a huge financial success, and de Lesseps and his backers were
eager
to take on new challenges.
Examining the world map, de Lesseps decided that a canal at Panama would be his
next
triumph, so, in the late 1870s, a French syndicate negotiated the necessary agreements in Bogota, Colombia, as Panama was then the northernmost part of Colombia. They were granted rights to build and
operate
a canal in exchange for a small percentage of the revenue to be generated over ninety-nine years.
While it might seem
curious
today that these projects so far from France originated there, in the late 1800s Paris was the center of the engineering universe. The best
schools
in the world were there, and many engineering giants of the day lived in Paris, including Gustave Eiffel (then planning his tower). These canal projects could hardly have arisen
anywhere
else.
The process of defining the Panama project started promisingly enough. In 1879, Ferdinand de Lesseps sponsored an "International Congress" to study the feasibility of a canal connecting the Atlantic and Pacific oceans through Central America. More than a hundred delegates from a large number of nations (although most of the delegates were French) gathered in Paris. A number of routes were
considered
, and canals through Nicaragua and Panama both were recommended as possibilities. Construction ideas, including a very realistic "lock-and-dam" concept (somewhat similar to the canal in service today), were also proposed. In the end, though, the Congress voted to support a sea-level canal project at Panama, even though nearly all the
engineers
present thought the idea infeasible and voted against it. Not listening to technical people is a perilous way to start a project. The Panama Canal was
neither
the first nor the last project to create its own problems through insufficient technical input.
Planning for the project was also a low priority. De Lesseps paid little attention to technical problems. He believed that need would result in innovation, as it had at Suez, and that the future would take care of itself. He valued his own
opinions
and ignored the views of those who disagreed with him, even when they were recognized authorities. An inveterate optimist, he was convinced, on the basis only of
self-confidence
, that he could not fail. These attitudes are not conducive to good risk management; there are few things more dangerous to a project than an overly optimistic project leader.
The broad objective de Lesseps set for his Compagnie Universelle du Canal Interoceanique was to build a sea-level canal in twelve years, to
open
in 1892. He raised $60 million from investors through public offerings—a lot of money, but still less than one-third of the initial engineering cost estimate of more than $200 million. In addition to this financial shortfall, the project was dogged by the fact that very little detailed planning was done before work actually commenced, and most of that occurred at the 1879 meeting in Paris. Even on the
visits
that de Lesseps made to Panama and New York to build support for the project, he failed to involve his technical people.
Eventually the engineers did travel to Panama, and digging started in 1882. Quickly, estimates of the volume of excavation required started to rise, to 120 million cubic
meters
—almost triple the estimates used in 1879. As the magnitude of the effort rose, de Lesseps made no public changes to his cost estimates or to the completion date.
Management of risks on the project, inadequate at the start, improved little in the early stages of execution. There were many problems. Panama is in the tropics, and torrential rains for much of the year created floods that impeded the digging and made the work very dangerous. The frequent rains turned Panama's clay into a
flowing
, sticky sludge that bogged down work, and the moist, tropical salt air combined with the viscous mud to destroy the machinery. There was also the issue of elevation. The
continental
divide in Panama is not too high by North or South American standards, but it does rise to more than 130 meters. For a canal to cross the central portion of Panama, it would be necessary to dig a trench more than fifteen kilometers long to this depth, an unprecedented amount of excavation. Digging the remainder of the eighty-kilometer transit across the isthmus was nearly as daunting. Adequate funding for the work was also a problem, as only a portion of the money that was raised was allocated to construction (most of the money went for publicity, including a very impressive periodic
Canal Bulletin
, used to build interest and support). Worst of all, diseases,
especially
malaria and yellow
fever
, were lethal to many workers not native to the tropics, and they died by the hundreds. As work progressed, the engineers, already dubious, increasingly believed the plan to dig a sea-level canal doomed.
Intense interest in the project and a steady stream of new workers kept work going, and the
Canal Bulletin
reported
good progress (regardless of what was actually happening). As the project progressed, there were changes. Several years into the project, in 1885, the cost estimates were finally raised, and investors provided new funds that quadrupled the project budget to $240 million. The expected opening of the canal was delayed "somewhat," but no specific date was
offered
. Claims were made at this time that the canal was half dug, but the truth was probably less than 15 percent. Information on the project was far from trustworthy.
In 1887, costs were again revised upward,
exceeding
$330 million. The additional money was borrowed, as de Lesseps could find no new investors. Following years of struggle and frustration, the engineers finally won the debate over construction of a canal at sea level. Plans were shifted to construct dams on the rivers near each
coast
to create large lakes that would serve as much of the transit. Sets of locks would be needed to bring ships up to, and down from, these manmade lakes. While this would slow the transit of ships somewhat, it significantly reduced the necessary excavation.
Even with these changes, problems
continued
to mount, and, by 1889, more revisions and even more money were needed. After repeated failures to raise funding, de Lesseps liquidated the Compagnie Universelle du Canal Interoceanique, and the project ended. This collapse caused complete financial losses for all the investors. By 1892, scandals were rampant, and the bad press and blame spread far and wide. Soon the
lawyers
and courts of France were very busy dealing with the project's aftermath.
The French do not seem to have done a formal postproject analysis, but a look at the project in retrospect reveals more than a
decade
of work, in excess of $300 million spent, lots of digging, and no canal. In the wake of the years of effort, the site was ugly and an ecological mess. The cost of this project also included at least 20,000 lives lost (many workers who came to Panama died so soon after their arrival that their deaths were never recorded; some estimates of the death toll run as high as 25,000). Directly as a result of this project failure, the French government fell in 1892, ending one of the messiest and most costly project failures in history.
The leader of this project did not fare well in the wake of this disaster. Ferdinand de Lesseps was not technical, and he was misguided in his beliefs that equipment and medicines would appear when needed. He also chronically reported more progress than was real (through either poor analysis or deception; the records are not clear enough to tell). He died a broken man, in poverty. Had he never undertaken the project at Panama, he would have been
remembered
as the heroic builder of the Suez Canal. Instead, his
name
is also linked forever to the failure at Panama.
Perhaps the one positive outcome from all this was clear evidence that building a sea-level canal at Panama was all but impossible because of the rains, flooding, geology, and other challenges. These are problems that probably could not be surmounted even with current technology.
While it is not possible ever to know whether a canal at Panama could have been
constructed
in the 1880s, better project and risk management practices, widely available at the time, would have helped substantially. Setting a more appropriate initial objective, or at least modifying it sooner, would have improved the
likelihood
of success. Honest, more frequent communication—the foundation of well-run projects—would almost certainly have either forced these changes or led to earlier abandonment of the work, saving thousands of lives and a great deal of money.
